KBRA Assigns Preliminary Ratings to Velocity Commercial Capital 2025-1 (VCC 2025-1)

KBRA assigns preliminary ratings to 12 classes of Velocity Commercial Capital 2025-1 (VCC 2025-1) mortgage-backed certificates.

VCC 2025-1 is a $351.6 million securitization collateralized by 791 small balance commercial loans secured by mortgages on 855 residential rental or commercial real estate (CRE) properties. The pool is comprised of 790 fixed rate mortgages and one floating rate mortgage. The loans have an average outstanding principal balance of $444,477 and range from $27,000 (<0.1%) to $6.6 million (1.9%). The weighted average appraisal loan-to-value (LTV) ratio and FICO score for the pool are 61.4% and 699, respectively.

The underlying properties are located in or near 160 Core Based Statistical Areas (CBSAs) across 39 states plus the District of Columbia. The top-three CBSAs represent 30.1% of the portfolio and include New York-Newark-Jersey City, NY-NJ-PA (17.0%), Los Angeles-Long Beach-Anaheim, CA (6.6%), and Chicago-Naperville-Elgin, IL-IN-WI (6.5%). The three largest state exposures represent 37.6% of the portfolio and consist of California (17.4%), New York (10.7%), and Florida (9.5%).

KBRA relied on its RMBS and CMBS methodologies to analyze the transaction. In doing so, KBRA divided the pool into two distinct loan groupings, as follows: Sub-pool 1 (490 loans, 41.4% of the total pool balance) is comprised of 489 Investor 1-4 loans (41.1%) secured by residential rental properties with four or less units and one loan (0.3%) secured by residential land. Sub-pool 2 (301 loans, 58.6%) consists of loans secured by commercial real estate assets. This sub-pool is largely comprised of industrial properties (47 assets, 13.4%), commercial condominium properties (38 assets, 8.8%), mixed-use properties (64 assets, 8.8%), retail properties (57 assets, 8.6%), office properties (43 assets, 8.4%), multifamily properties (25 assets, 6.1%), automotive properties (22 assets, 3.0%), day care properties (three assets, 0.8%), and hospitality (two assets, 0.6%). KBRA reclassified the mixed-use and commercial condominium property types to each asset’s respective core use and classified automotive service properties as retail for our analysis.

The RMBS and CMBS portfolio credit model results were combined, on a WA basis, to determine KBRA’s modeled expected losses at each rating category and reflect the quality of the collateral, diligence, and information quality relative to typical RMBS and CMBS transactions. The losses were subsequently incorporated into our cash flow modeling, which was used to evaluate the transaction’s credit enhancement levels in the context of its modified pro rata structure.

This press release was updated since its initial publication on January 31, 2025 to correct a typographical misprint of the LTV. This did not have any impact on KBRA's analysis of ratings. This press release was last updated on January 31, 2025.

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Methodologies